Friday, 30 June 2017

End of isolation despite sanctiosn for Russia

It
was the time when Western politicians are collectively saying about
the "isolation" of Russia. Now Western and Eastern
capitalists compete with each other, submitting applications for
purchase of bonds of the Russian Federation.

Putin
"laughs in the face of the West" (Putin lacht ins Gesicht
dem Westen), believes Holger Scheetz. Why is he laughing, he told a
journalist in the newspaper "Die
Welt".

To
the chagrin of Western politicians, the latest attempt by Russia to
find the money from international investors had "great success",
says the author.Probably,
Vladimir Putin may believe his luck. The President of Russia has
scored a major victory. Until recently, Putin was practically
impossible to get a loan from anyone. Recently "Empire"
Putin was suffering from a crisis caused by the Western response to
the annexation of Crimea and the fall in world oil prices.
Simultaneously with the decrease of revenues from oil trade for the
Kremlin has become almost impossible to obtain financing in the
international capital markets.

But
Putin was able to change: he found new investors, indicates Scheetz.
Just at a time when relations between the Kremlin and the White house
reached a low point since the end of the cold war, Western investors
were once again "willing to give money" to Moscow. The
Kremlin gave a plus: financial markets gave Russia three billion
dollars, writes, Scheetz. At the same time, Moscow will not stop: it
is about raising up to $ 6.6 billion from international
investors.

This
is a symbolic "show of force the Russian," and she "can't
fail", says the journalist. Judge for yourself: no sooner had
the Americans to toughen sanctions against Russia, as the Kremlin,
after some two hours, placed bonds on the markets. Moreover, the sale
was carried out not by some Bank, and the state VTB Capital, which is
included in the sanctions lists on both sides of the Atlantic. This
Bank has organized placement of bonds.

So,
Russian should celebrate the success. It is a victory of economic
reason over geopolitical constraints. Andrey Kostin, CEO of VTB,
says: "the World of investors decided that sanctions are not a
decisive factor, if the conditions are attractive".

Investors
actually received these attractive conditions. Columnist recalls that
during the placement of Russian bonds compared with transactions in
Germany or the United States had proposed a much higher interest
rate. Over the ten-year dollar-denominated bonds Moscow pays a coupon
of 4.25 percent, or about two percentage points more than allow the
beneficiaries to U.S. Treasury bonds. For 30-year debt securities
investors receive 5.25 per cent — and this is the real "prize"
in the amount of 2.5 percentage points over US Treasuries.85%
of buyers of Russian securities to foreign investors. More than a
third of them from the United States, about 30% from the UK. However,
Eurozone countries behaved very reserved. Only nine per cent of debt
securities were sold to Russian investors from these
countries.

"Despite
low oil prices, Russia has access to favorable financing", —
noted Zh-K. Sambor, an expert on emerging markets, "BNP Paribas
Investment Partners" from London.Development
of financial events shows that the Kremlin can bypass Western
sanctions just "playing", says Scheetz. On the other hand,
the US government last year warned about the involvement of investors
in the purchase of such bonds.

With
the current bonds, many investors refused to accept the transactions
involved. "We have no right to trade with VTB" — said the
publication "Bloomberg" portfolio Manager "Union
Investment Privatfonds GmbH". The Fund considers "strict
rules" imposed sanctions.

However,
the successful placement of the bonds marks a turning point in the
financial markets, says the German journalist. Since Moscow's
relations with the West deteriorated significantly in the spring of
2014 ("the beginning of the Crimean crisis"), Russia has
received "political premium" for the risk. Even when
sanctions against individual companies and officials have not yet
been finally adopted, Russia "was virtually isolated from the
markets." This happened because the financial markets constitute
a "helper" of Western policy.Now
Putin has returned the country to embrace large investors. Despite
the low price of oil, financial traders believe that in Russia the
risk of insolvency is only 11%. This is due to the fact that the
economy of the Russian Federation again began to grow. At least this
is the case in recent months. The economy has emerged from recession
this year, GDP could grow by 1.2% and next year by 1.6% (analyst
estimates). The country's foreign reserves amount to more than $ 400
billion vs $ 50 billion (at least 2015). However, the new
anti-Russian sanctions can change the situation.Today
Putin "can enjoy financial success", concludes the
author.Thus,
add, Russia, despite Western sanctions, acted as an attractive
borrower in the foreign market. The capitalists could not miss out on
great deals and a pretty high percent.The
total volume of the collected bids totaled more than 6.6 billion. but
the proposal received more than two hundred investors. Incidentally,
as recalled by "Nezavisimaya
Gazeta",
the payment of coupons on both bonds will be held every six
months.The
optimistic data coming GDP growth Russia leads the rating Agency
"Fitch". "NG" indicates that at the beginning of
last week it announced expectations for the Russian economy: the
growth of the latter should be in 2017, and 1.6%; the growth of GDP
in the next two years even exceeds 2%.The
Russian financial experts have no special optimism about the sale of
bonds do not.The
output of the government of Russia on the external market of foreign
currency loans was held with a record low turnout of investors from
the EU, according to the portal Finanz.ru.The
first issue of bonds (ten-year) one-third went to investors from the
UK, 22% was bought by the Americans, and another 30% was bought by
Russian banks. Funds from the EU (excluding the UK) bought only 6%.
Their share was comparable with attachments from Asia, said the head
of debt capital markets, VTB Capital Andrey Solovyev.The
second edition (30 year) went to 36% in USA and 30% in the UK. The
share of buyers of the EU amounted to only 9% and is twice as less
Asian investments (18%).Sanctions
act, and act harshly. "I'm not allowed to trade with VTB, —
quotes the edition of Eric Vanraes, investment Manager "EI
Sturdza Investment Funds" for the bond funds in Geneva. — It
would have been very different if I were the co-organizers. We must
strictly comply with the sanctions. We exclude contacts with Russian
brokers mentioned in the sanctions list."For
the "attraction" of foreign investors in Russia every six
months will pay interest, which would place an additional burden on
the economy. Burden, among other things, currency. Which will put
pressure on the shoulders of not only present generations but also
future.

The
Council of the European Union has prolonged economic sanctions
against Russia

The
Council of the European Union officially prolonged economic sanctions
targeting specific sectors of Russia’s economy by six months until
January 31, 2018, according to a statement published on Wednesday.

This
decision follows an update from French President Emmanuel Macron and
German Chancellor Angela Merkel to the European Council of June
22-23, 2017 on the implementation of the Minsk Agreements. "This
paved the way for the renewal of sanctions for a further six months,"
the statement said.

"The
Council formalised this decision today by written procedure and, in
line with the rule for all such decisions, unanimously," it
read.